Law School and Subprime Loans

The bottom may have fellen out of the market for law school graduates. Ameet Sachdev writes in the Chicago Tribune that:

Double-digit tuition increases in the last 25 years have priced law schools out of reach for many. Yet the promise of a career at a big law firm with its six-figure paychecks kept boosting enrollment. Easy credit allowed more students to finance their law degrees. All of a sudden law firms lay off droves of attorneys and limit the number of new hires, leaving graduates out of work with more than $100,000 in loans to repay.

Sachdev’s idea comes from a piece by University of Illinois law professor Christine Hurt, who writes on the Conglomerate Blog that the trouble is that law school debt is strikingly like the subprime mortgages.

The conventional wisdom went that huge debts were okay because real estate prices always rose and going to law school always paid off. Not so much. Not only has the housing market collapsed, the high-paying legal sector jobs are gone too. Large firms hired about half the number of associates in 2009 that they hired the year before.

“So,” Hurt writes, “what’s the future of law school pricing? Will someone create an affordable model that doesn’t depend on third-party financing?” So far no one seems to have really come up with a better model.